Bank Bailout Germany's Commerzbank Announces Partial Nationalization

The billions in risks created by Commerzbank's recent acquisition of Dresdner Bank posed a threat to the financial institution's very existence. The bank said Thursday it would receive an 10 billion euro bailout from the German government, which would acquire a 25-percent share in the bank.

In the first major bailout of a private German consumer bank since the financial crisis began in earnest in September, Commerzbank said Thursday it would accept a government bailout totalling around €10 billion ($13.6 billion) that would see the federal government in Berlin take a 25-percent share in the troubled financial institution.

"This will be realized by issuing roughly 295 million ordinary shares, plus a silent participation of approximately €8.2 billion," the bank announced in a statement. "A price of €6 per share has been agreed."

Commerzbank, which is Germany's second-largest bank, ran into liquidity problems because of extra burdens its recent acquisition of Dresdner Bank placed on it during an already difficult financial crisis. The bailout is being managed by the Special Fund for Financial Market Stabilization  (Soffin), the German agency that has been set up to make €480 billion available to troubled German financial institutions. News that Commerzbank was negotiating the terms of a bailout with Soffin emerged in December.

Shares in Commerzbank fell by 21.3 percent to €4.79 after the news, the lowest value in the company's history. By late afternoon, however, shares had recovered slightly, down by 8.87 percent to €5.55.

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